DELAY IN SETTLEMENT OF FINAL...

DELAY IN SETTLEMENT OF FINAL ACCOUNT

HAJARATUL AZILA BINTI ROMLI

UNIVERSITI TEKNOLOGI MALAYSIA

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DELAY IN SETTLEMENT OF FINAL ACCOUNT

HAJARATUL AZILA BINTI ROMLI

A thesis submitted in fulfilment of the

requirements for the award of the degree of

Master of Science in Construction Contract Management

Faculty of Built Environment

Universiti Teknologi Malaysia

JANUARY 2015

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Specially dedicated with deepest love to Umi and Abah, Datin Hanisah Binti Hj

Ismail and Dato’ Hj Romli Bin Hj Hassan and my husband Mohammad Harith Bin

Mohd Yunos

Thank you for your support, love and encouragement

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ACKNOWLEDGEMENT

In the name of Allah most gracious most merciful.

In preparing this thesis, I was in contact with many people, researchers,

academicians and practitioners. They have contributed towards my understanding

and thoughts. I wish to express my sincere appreciation to my supervisor, Assoc.

Prof. Dr. Sr. Maizon Binti Hashim, for encouragement, guidance, critics and

friendship. Also not forgotten to all the lecturues in programme of Master of

Science (Construction Contract Management) especially Assoc. Prof. Dr. Sr. Rosli

Bin Abdul Rashid, En. Jamaluddin Yaacob and Assoc. Prof. Dr. Nur Emma

Mustaffa for being so helpful and understanding.

I am so very thankful to all my family especially to my beloved husband, for

always being with me to light up my spirit and motivation. Not forgetting my

dearest parents, brothers and sisters, for always supporting me during the process of

completing of my study. My sincere appreciations to all my colleagues and others

who have provided assistance at various occasions. Their views and tips are useful

indeed.

Thank you

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ABSTRACT

When the project is certified to be practically completed the contractor will

be entitled to be paid the final payment. There are a lot of criticism regarding the

final account for construction projects that have been settled unreasonably late or far

beyond the period stipulated in the contract. This scenario occurs due to the duration

to settle the final account by government agencies. The government agencies have

failed to prepare the final accounts and final certificates according to the period

stated in the condition of contract and the government agencies also failed to release

the performance guarantee sum or performance bond within stipulated time.

Therefore, the objective of this study is to identify the problem associated with the

settlement of final account in the government projects and to recommend the

solution to the problem related to settlement of final account. The scope of this study

is limited to government project and government agencies . This questionnaires and

interview will be analysed to achieve the aims to identify the problem associated

with the settlement of final account and recommended solution. From the analysis, it

can be summarized that, there are ten (10) serious problems associated with the

settlement of final account. This are listed as variation, price, time, contractor,

contract, management matter (contract administrator), human, contractual, client and

external factor. There are numerous solutions to resolve these problems that have

been identified by the respondents in chapter 5 of the study. Therefore, by

conducting this research, hopefully will help the quantity surveyor and contract

administrator in identifying the problems in settlement final account and make

reasonable actions as soon as possible. This also to enable quantity surveyor to

reduce potential conflict in final account settlement and to ensure that the final

account and final certificate can be completed in timely manner.

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ABSTRAK

Apabila projek itu disahkan secara praktikal siap kontraktor berhak untuk

dibayar pembayaran akhir. Terdapat banyak kritikan berkenaan akaun akhir bagi

projek-projek pembinaan yang telah dibayar lewat atau lambat daripada tempoh

yang ditetapkan dalam kontrak. Senario ini terjadi kerana terdapat penangguhan di

dalam penyelesaian perakaun muktamad oleh agensi kerajaan. Kegagalan agensi

kerajaan untuk menyediakan akaun muktamad dan sijil akhir mengikut tempoh

yang dinyatakan dalam syarat-syarat kontrak dan juga kegagalan agensi kerajaan

untuk melepaskan wang jaminan perlaksanaan dalam masa yang ditetapkan. Oleh

itu, objektif kajian ini adalah untuk mengenalpasti masalah yang berkaitan dengan

penyelesaian perakuan muktamad dalam projek-projek kerajaan dan mencadangkan

penyelesaian kepada masalah tersebut. Skop kajian ini adalah terhad untuk projek

kerajaan dan agensi-agensi kerajaan. Soal selidik dan temubual akan dianalisis untuk

mengenalpasti masalah yang berkaitan dengan penyelesaian perakuan muktamad dan

cadangan penyelesaian yang disyorkan. Daripada analisis yang dijalankan, dapat

dirumuskan bahawa, terdapat sepuluh (10) masalah yang serius berkaitan dengan

penyelesaian perakuan muktamad. Diantaranya ialah perubahan, harga, masa,

kontraktor, kontrak, perkara-perkara pengurusan (pentadbir kontrak), manusia,

perkara-perkara kontrak, pelanggan dan faktor luaran. Penyelidikan ini, diharapkan

dapat membantu juruukur bahan dan pentadbir kontrak di dalam mengenalpasti

masalah dalam penyelesaian perakuan muktamad dan mengambil tindakan

sewajarnya secepat mungkin. Penyelidikan ini juga bertujuan untuk membolehkan

juruukur bahan mengurangkan pertelingkahan di dalam penyelesaian perakuan

muktamad dan memastikan perakuan muktamad dapat diselesaikan mengikut

tempoh ditetapkan.

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TABLE OF CONTENTS

CHAPTER TITLE TITLE

THESIS DECLARATION i

SUPERVISOR’S DECLARATION ii

TITLE PAGE iii

DECLARATION iv

DEDICATION v

ACKNOWLEDGEMENT vi

ABSTRACT vii

ABSTRAK viii

TABLE OF CONTENTS ix

LIST OF TABLES xv

LIST OF FIGURES xviii

LIST OF ABBREVIATION xix

LIST OF SYMBOLS xx

LIST OF CASES xxi

LIST OF APPENDICES xxii

1 INTRODUCTION

1.1 Introduction 1- 4

1.2 Problem Statement 4-6

1.3 Research Questions 6-7

1.4 Research Objective 7

1.5 Scope of Research 7

1.6 The Significant of Research 7- 8

1.7 Organization of Thesis Chapter 8 - 9

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1.7.1 Chapter 1 : Introduction 8

1.7.2 Chapter 2 : Final Account in Government Sector 8

1.7.3 Chapter 3 : The Problem in Final Account Settlement 9

1.7.4 Chapter 4 : Research Methodology 9

1.7.5 Chapter 5 : Data Analysis 9

1.7.6 Chapter 6 : Conclusion and Recommendation 9

1.8 Conclusion 10

2 PROCEDURE IN THE SETTLEMENT OF FINAL ACCOUNT

2.1 Introduction 11

2.2 Defination of Final Account 11- 12

2.3 The Purpose of Final Account 13

2.4 Party involved in Preparation

Settlement of Final Account 13-15

2.4.1 Client 13

2.4.2 Superintendent Officer 13- 14

2.4.3 Consultant 13

2.4.4 Contractor 13

2.5 Final Account Requirement 13

2.6 The important of Final Account Settlement 13

2.7 Express Contractual Provisions 13

2.8 General content in Final Account 13

2.9 Process and Procedure 20-21

2.9.1 Procedure in Form of Contract

PWD 203/203A (Rev. 1/2010) 21-25

2.9.2 General Process in Standard Form of Contract 13

2.9.3 The Standard of Procedure for

Final Account settlement 30-32

2.9.4 Process of Final Account

in Standard of Procedure 33-51

2.10 Conclusion 51

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3 PROBLEMS IN THE FINAL ACCOUNT SETTLEMENT

3.1 Introduction 52

3.2 Problem related to settlement of the Final Account 52-67

3.3 Problem in Final Account settlement

according to circular 70-71

3.4 Solution to the problem in Final Account settlement 71-78

3.5 Improvement procedure of Final Account

settlement in circular 78-81

3.6 Conclusion 81

4 RESEARCH METHODOLOGY

4.1 Introduction 82

4.2 Research Methodology 82-82

4.2.1 Stage 1 : Initial Study and Finding the research 83-84

4.3 Stage 2 : Literature review, data collected

and research design 85

4.3.1 Literature review 85-87

4.3.2 Research Design 87-93

4.3.3 Instrument of Data Collection 93-96

4.4 Stage 3 : Data Analysis and Interpretation 96

4.4.1 Data Analysis Technique 96

4.4.2 Questionnaires Analysis 97-98

4.4.3 Interview Analysis 98-99

4.5 Stage 4: Writing-up 100

4.5.1 Structuring and writing the thesis 100

4.6 Research Framework 100-100

4.7 Conclusion 102

5 DATA ANALYSIS

5.1 Introduction 103

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5.2 Part A : Background of respondent 103

5.2.1 Analysis of respondent background 104

5.2.2 Analysis the number of project involved

by respondent over 5 years 105

5.3 Part B : Perception of the respondent

regarding in Final Account Settlement 103

5.3.1 Analysis of respondent perception

in final account settlement 103

5.3.2 Analysis of the respondents regarding

the important of Final Account Settlement 103

5.4 Part C : The Problems in Final Account Settlement 105

5.4.1 Analysis of the respondents’s involvement in

Final Account Settlement 105

5.4.2 Analysis of the respondents’ satisfaction with

final account procedure implemented

by government 105

5.4.3 Analysis of the frequency of the problems caused

by contractor during the final account settlement 105

5.4.4 Analysis of the respondents’ satisfaction with the

final account procedure implemented

by government 105

5.4.5 Analysis of the duration taken by respondent in

Final Account settlement 112-113

5.4.6 Analysis to determine the respondents’ view

of the delay in final account settlement and

whether it will affect the contractor 105-114

5.4.7 Analysis conducted to determine the most serious

factor contribute to problem

in final account settlement 114-116

5.4.8 Analysis the reason contribute to the problem


5.4.8.1 Time 117-120

5.4.8.2 Contract 121-126

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5.4.8.3 Price 127-128

5.4.8.4 Human 129-131

5.4.8.5 Variation 132-135

5.4.8.6 Contractor 136-139

5.4.8.7 Management Matter

(Contract Administrator) 139-144

5.4.8.8 Client 144-148

5.4.8.9 Contractual 148-151

5.4.8.10 External Factor 151-154

5.5 Part D : Improvement in the Final Account Settlement 154

5.5.1 Analysis whether 3 months duration is enough

for final account settlement 154-157

5.5.2 Analysis the reasonable period to

start final account 105

5.5.3 Analysis to determine the respondent opinion

regarding the acceptable of standard of procedure

to describe in a condition of contract

for final account settlement 158-159

5.5.4 Analysis to the view the respondent’s

opinion regarding the early settlement

in final account help in improving

the performance of contractor 159-160

5.5.5 Analysis to identify the suitable recommended

solution related to the problem in

final account settlement 161

5.5.5.1 Time 161-162

5.5.5.2 Contract 163-165

5.5.5.3 Price 166-167

5.5.5.4 Human 168-169

5.5.5.5 Variation 170-171

5.5.5.6 Contractor 172-174

5.5.5.7 Management Matter

(Contract Administrator) 175-179

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5.5.5.8 Client 180-181

5.5.5.9 Contractual 182-184

5.5.5.10 External Factor 185-186

5.6 Interview 105

5.6.1 Analysis the Question 1: In your opinion,

what are the reasons related to the problem


5.6.2 Analysis the Question 2: if the problem

in final account settlement happen

what action can be taken? 193-195

5.6.3 Analysis the Question 3: it is the

final account procedure need to

be improved? Why? 196

5.6.4 Analysis the Question 4 : In your opinion

is there any suggestion to minimize

the problem in final account settlement 197-200

5.7 Conclusion 200-209

6 CONCLUSION AND RECOMMENDATION

6.1 Introduction 210

6.2 Research conclusion 210-220

6.3 Constraints during the Research 220

6.4 Future Study 220

6.5 Conclusion 220-222

REFERENCES 223-231

Appendices A - E 232 - 270

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LIST OF TABLES

TABLE NO. TITLE PAGE

3.1 Forms of Contract in Malaysia 63

4.1 Schedule for determine the sample size

by Krejcie and Morgan (1970) 91

4.2 Number of target of respondent to distribution questionnaires 92

4.3 Scale Rating for Relative Index Method 97

5.1 The respondents background based on the total

distribution and return of questionnaires 104

5.2 Number of project involved by respondent over 5 years 105

5.3 Perception of respondent in Final Account 106

5.4 The important of Final Account Settlement 107

5.5 The respondents’ involvement of Final Account Settlement 108

5.6 The respondents’ satisfaction level in the procedure of

final account settlement 109

5.7 The frequency of the problem caused by contractor

during the final account settlement 110

5.8 The respondents’ satisfaction with the process

of final account settlement after the Certificate of

Practical Completion 111

5.9 The duration taken by respondent in final account settlement 112

5.10 The respondent’s view the delay in the preparation

final account and whether it will affect the contractor 113

5.11 The factor influencing the problem in Final Account Settlement 115

5.12 The reason related to time factor contributed the problem

in Final account settlement 117-118

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5.13 The reason related to contract factor contributed the problem


5.14 The reason related to price factor contributed the problem

in Final account settlement 127

5.15 The reason related to human factor contributed the problem


5.16 The reason related to variation factor contribute the problem


5.17 The reason related to contractor factor contributed the problem


5.18 The reason related to management matter (contract administrator)

factor contributed the problem in


5.19 The reason related to client factor contributed the problem


5.20 The reason related to contractual factor contributed

the problem in final account settlement 148-149

5.21 The reason related to external factor contribute the problem


5.22 The 3 months duration is enough for


5.23 The reasonable period to start the Final Account Settlement 157

5.24 The respondent’s opinion regarding the acceptance of

Standard of procedure implemented by government to

to describe in a condition of contract 159

5.25 The respondent opinion the early settlement of final account

helps in improving performance of th contractor 160

5.26 The suitable recommended solution in time related

problems in final account settlement 161

5.27 The suitable recommended solution in contract related


5.28 The suitable recommended solution in price related


5.29 The suitable recommended solution in human related

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5.30 The suitable recommended solution in variation related


5.31 The suitable recommended solution in contractor related


5.32 The suitable recommended solution for management matter

( contract administrator) problems in final account

settlement 175-176

5.33 The suitable recommended solution for client related


5.34 The suitable recommended solution for contractual related


5.35 The suitable recommended solution for external factor


5.36 Summary of the reason related to the problems

in the final account settlement 187

5.37 The action can be taken if the problem in settlement

final account happen 193-194

5.38 The Final Account procedure need to improved 196

5.39 The suggestion to minimize the problem in

final account settlement 197-198

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LIST OF FIGURES

FIGURE NO. TITLE PAGE

2.1 Flow chart of closing Final Account

Based to PWD 203A (Rev 1/2010) 25

2.2 Flowchart on general procedure for preparation of

Final Account (Part I) 26

2.3 Flowchart in general procedure for preparation of

Final Account (Part II) 27

2.4 Flowchart in general procedure for preparation of

Final Account (Part III) 28

2.5 Process of closing Final Account 39

2.6 Period for preparation Final Account 41

2.7 Flowchart in standard procedure for preparation of

Final Account 43

2.8 Flowchart in standard procedure for preparation of

Final Account in mutual termination 48

2.9 Flow chart for preparation final account in

government 50

3.1 Factor influencing final account settlement 68

3.2 Factor Final account closing delay in theorical

framework 69

4.4 Research Methodology Framework 101

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LIST OF ABBREVIATION

CMGD Certificate of Making Good Defect

FA Final Account

EPU Economic Planning Unit

VO Variation Orders

KPPK Ketua Penolong Pengarah Kanan

JKR Jabatan Kerja Raya

SAKPKR Surat Arahan Ketua Pengarah Kementerian Kerja Raya

Bil Bilangan

SKALA Sistem Pengurusan Projek

SPK Sistem Pematuhan Kerja

CPC Certificate of Practical Completion

SO Superitendent Officer

CL Clause

SPP Surat Pekeliling Perbendaharaan

PK Perolehan Kerajaan

PMK Pegawai Mentadbir Kontrak (Agensi/ Konsultant)

PP Pengawai Penguasa atau Pengarah Projek bagi Projek Reka

Bina

LAD Liquidated and Ascertained Damages

APK Work Change Directive (Arahan Perubahan Kerja)

PHK Adjustment for omission Contract Sum (Pelarasan Harga

Kurangan)

SOFA Statement of Final Account

VOP Variation of Price

WJP Performance Guarantee Sum (Wang Jaminan Perlaksanaan)

SPSS Statistical Packaging for Social Science

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LIST OF SYMBOLS

∑ - total sum

n - the number of respondent indices

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LIST OF CASE

NO. CASE PAGE

1 Rees & Kirby Ltd v Swansea City Council (1983) 16

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LIST OF APPENDICES

APPENDIX TITLE PAGE

A Sample of Questionnaire 232-248

B Sample of Interview question 249-250

C Sample of Checklist for Final Account 251-255

D Sample of Final Account Form 256-260

E Summary of the problem and solution 261-270

For settlement of final account

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CHAPTER 1

INTRODUCTION

1.1 Introduction

The final account refers to the calculation and adjustment of the final

construction cost between the client or employer and the contractor based on a fair

valuation of the work carried out. Thus, a contractor’s actual profits or losses can be

determined when the final account is settled (Chan, 2002). Any delay in final

account settlement can adversely affect the contractors’ cash flow and the ability to

secure its finance (Ashworth & Hogg, 2002).

The finalizing of the account is not a one sided activity involving the contract

administrator but entails the necessary input of the contractor especially in terms of

the provision of the relevant documents, substantiation each in regard to his claims

and also of those pertaining to his sub-contractor. Therefore, there must be a pro-

active approach on both sides and a strict adherence to any programmed or deadlines

set. For that reason, the issue of the final account remaining open for years after ther

Certificate of Making Good Defect (CMGD) has been issued in majority of contract

(Harbans Singh,2010).

Besides that, the final account period of settled is depending on the final

payment certificate described in contractual prescribed timescale. It is classified as

on time and satisfaction, if the final account settlement is completed in the

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contractual prescribed timescale. It is classified as delay and dissatisfaction, if the

prescribed timescale overrun or if the engineer is not able to issue the final payment

certificate within such timeframe (Walker, 1998).

One of the conditions of the contract that led to problems and disputes in

preparation of the final account settlement is duration for preparation. Although the

contract clearly identify the period for the issuance of the final account of not later

than three (3) months after the issuing of the Certificate of Making Good Defect

(CMGD). The period of three (3) months is a practical and reasonable time for all

parties. However, as with the preparation of other documents in the administration of

a building contract, the process of preparation final account often face problems and

obstacles (Quantity Surveying, 2010). Moreover, the lack of understanding the roles

and responsiblilities in the contract regarding the issuance of a final payment

certificate to the contractor will cause the disputes and problems in the closing of the

final account statement (Zarabizan et al., 2012).

Therefore, settling a final account can be long drawn out process, that brings

together all financial aspects of the contract. The goal for a final account is to agree

to a fair valuation of the works undertaken by the building contractor and to enable

the contract administrator to issue the final certificate, thereby concluding the project

works. Reaching an agreement between parties may involve much negotiation and

the final accounts prepared from these should be able to withstand the most stringent

financial audit as it’s legally binding (Ashworth & Hogg, 2002).

Although the backlogs in the closing of final accounts have existed for

decades, there are many factors significantly affecting the closing of a final account.

For example, the construction projects in Hong Kong have been identified

contractual, contractor and management. Unfortunately, factors delay in closing

final account usually attract less attention and priority by project participant more

difficult and frequently leads to emergence of unnecessary dispute (Kwok Chi Ko,

2009).

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The rapid increase of the late payment issues nowadays has gone to the point

that it tends to decrease the good image of construction in Malaysia. The Malay

Contractor Association whom once revealed that some contractor are owed RM 100

million to RM 200 million for four to five years, mostly on final payment (Utusan

Malaysia, 2006). According to the then Prime Minister Abdullah Ahmad Badawi

(2006) dated 6 October 2006, complaints relating payment to contractors and

supplier tends to give negative perception that the implementation of the 9th

Malaysia Plan is moving at a slow pace. This shows the seriousness of the

problems because it is related to the image of Malaysia’s construction industry

(Zarabizan et al., 2013).

However, parallel to these increasing developments in the construction

industry, the practices and procedures today are vastly different from the old days.

There are numerous criticisms as to the increasing number of the construction

projects final account of which were settled unreasonably late or far beyond the

period stipulated in the contract (Zarabizan et al., 2013).

In PWD Form 203A (Rev. 1/ 2010), the contract states that the Contractor

shall submit full particulars complete with supporting documents within but not

more than three (3) months after issuing of the Certificate of Practical Completion.

The Superintendent Officer (S.O) shall issue the Final Certificate within three (3)

months after the expiry of the Defect Liability Period for the whole of the Works or

three (3) months after the issuance of the Certificate of Completion of Making Good

Defect (CMGD) in Clause 31.

According to circular “Surat Pekeliling Perbendaharaan, SPP Bil.6 Tahun

2011”, the Superintendent Officer shall issue a final account and final certificate

within three (3) months after the expiration of the defect liability period for the entire

work, or three (3) months after the Certificate of Making Good Defect (CMGD)

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issued, whichever is later, according to the provisions of the contract. However,

according to Surat Arahan KPKR Bil (6) dlm. JKR.KPKR. 020.050/3 Klt.4 dated

20.9.2000, the final account and final certificate should be issue not later than 6

months after the date of Practical Completion has been issued.

According to the Perolehan Kerajaan (PK 4/2013), with regard to the

adjustment of the contract sum and approved claims by the Claims Committee, the

agency shall prepare a statement of final account within the prescribed period.

Under the traditional contract the period for preparation statement of final account is

nine (9) months from Certificate of Practical Completion. Whereas under design and

build contract the period for preparation statement of final account is twelve (12)

months from Certificate of Practical Completion. But, it is different indicated in the

SA KPKR Bil. 14/2012 which is during the preparation of the statement of final

account established for six (6) months after the Certificate of Practical Completion

was issued for both type of contract namely traditional and design and build project.

If the final account does not settle according to the duration stated in

construction contract the contract administrator is legal binding. But if the final

account is not settle according to the Treasury Circlular or any circular provided by

department the contract administrator will be surcharge or disciplinary action will

be taken to him. Normally, late or delay due to many reasons such as management

matter (contract administrator), client, consultant, contractor, price, variation, time,

contract, contractual, external factor and others.

1.2 Problem Statement

The delay in payment of the final account and discharge performance

guarantees are often the issues and dilemmas for the contractors nowadays. In

newspaper Utusan Malaysia newspaper article dated 11 December 2002, it was

reported that many contractors have still not received any payment from the agencies

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after completing the work. Therefore, the Deputy of Prime Minister Dato’ Seri

Abdullah Ahmad Badawi in his instruction dated on the 3rd of July 2001 has issued

an order to government agencies to expedite the payment to contractors including

the issuance of the final account and the final certificate.

According to Norshimah Meon, the Ketua Penolong Pengarah Kanan

(KPPK) of the Jabatan Kerja Raya (JKR) Selangor (2010) the delays in final account

also occur in government agencies because of unfamiliarity with new procedures and

rules introduced by the government and also due to time constraints. As a result, the

appointed quantity surveyor cannot perform the best services for government (Sr.

Norshimah Bt Meon & Pn. Hanawati Bt. Hashim, 2010).

The conflict between regulations and procedures set forth by the government

or the relevant agencies can also occur in the end condition of contract and document

tender. As stated in the KPKR (Surat Arahan Ketua Pengarah Kementerian Kerja

Raya circular, the SAKPKR Bil. 14/2012), the statement of final account should be

prepared six months after the issuance of the Certificate of Practical Completion

(CPC). However, both Clause 31.4 of PWD 203A (Rev. 1/ 2010) for conventional

contract and Clause 54 of PWD 203 (Rev. 1/ 2010) for design and build, indicate

that the final account must be issued by three months after the Certificate of Making

Good Defect (CMGD). The different period in the settlement of the final account has

created problems to the contract administrator to complete the final account (QS

Corner, 2013).

The various agencies have also came out with standard of procedure and

office procedures on how to settle the final account within the stipulated time. But

no pointed out the issue or problem of late settlement of final account still persist.

Some can be months to 3 years which significantly longer than stipulated in due

contract and as stated by the standard of procedure. For example, in yearly report

2013 by “Cawangan Kontrak dan Ukur Bahan, Jabatan Kerja Raya” has stated

Statement of Final Account was prepared more than 6 months from the date of

Certificate of Practical Completion issued. The date of Certificate of Practical

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Completion is 20 May 2012 which stated in “Sistem Pengurusan Projek” (SKALA)

while the date of certify the Statement of Final Account is 20 Augurst 2013.

Moreover, in Audit Report 2012 (Siri 1) has stated, the delay in issued final account

has identify in Project Redevelopment of Kuala Terengganu Airport Project Package

11-Terminal Building. It can be seen when the Certificate of Making Good Defect

(CMGD) has been issued at Julai 2010 but the delay is 652 days. Furthermore, in

Audit Report 2012 (Siri 2), has stated 29 project has been delay in issung final

account which is about 4 to 44 months.

Therefore, a lot of conflicting can be made in connection with the duration to

settle the final account. One of them is that the final account settlement has always

been delayed by the government agency. The government agency failed to prepare

the final account and the final certificate at the time specified in the contract, and the

government agency failed to release performance monies within the stipulated time

(Zain, 2003).

Due to the problem related to the issuance of final account settlement, this

study will identify the problems in the final account settlement and recommend the

solutions accordingly.

1.3 Research Questions

The discussion and the statatement of problem highlighted important

questions:

a) What are the problem in finalization final account by the contract

administrator?

b) What are the legal implication of the delays in the final account in

accordance with the contract?

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c) What are finalization and payment of the remedy available to the

contractor in the event of delay in closing final account?

1.4 Research Objectives

The objectives of this research are:-

1. To identify the problem associated with the settlement of final

account in the government projects; and

2. To recommend the solution to the problems related to the settlement

of a final account

1.5 Scope of Research

This research is limited to government project and government agencies.

1.6 The Significance of Research Study

This research is important in order to get a picture of the existing problems

in the final account settlement and to provide solutions for the quantity surveyor’s

practice in government agencies. It also can alert various parties that the delay in the

preparation of the final account actually has legal implications and may allow the

contractor to claim compensation. It also aimed to enable quantity surveyor to reduce

potential conflict in the final account settlement and to ensure that the final account

settlement can be completed in a timely manner.

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In addition, this research also aims to answer questions that arise in the final

account settlement. Furthermore, this research can helps contract administrator and

quantity surveyors to make reasonable actions related to final account settlement.

While to the contractors and other party involved, it is to assist them fully

understand problems in final account settlement. Findings of this research will also,

provide readers and other interested parties with a better appreciation and

understanding of the problem in final account settlement in government agencies.

1.7 Organization of Thesis Chapter

The report is organized into six (6) chapters:

1.7.1 Chapter 1: Introduction

This chapter, will discuss the background of the problem, problem statement,

objectives of the research, scope of study, significance of the study and the

organization of the thesis chapter.

1.7.2 Chapter 2 : Final Account in Government Sector

This chapter discusses the definition of a final account, parties that are

involved in final account, contractual provisions, and procedures in the issuance of

the final account by construction contract and the standard procedures in government

agencies.

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1.7.3 Chapter 3 : The problem in Final Account Settlement

This chapter will discuss, the hypothesis of the problem or causes of the

delay in final account settlement and the solution to the problem in final account

settlement.

1.7.4 Chapter 4 : Research Methodology

This chapter is to explain research methodology that has been endorsed in

this study which consist of explanations on the method used and reasons behind the

selection.

1.7.5 Chapter 5 : Data Analysis

In this chapter, all the survey questionnaires will be divided into four sections

and analysis. In Part A the analysis aims to identify the respondent background. In

Part B the analysis aims to identify the perception in final account settlement. Hence,

in Part C and Part D analysis will focus on the problems in final account settlement

and the recommended solution for them.

1.7.6 Chapter 6 : Conclusion and Recommendation

This chapter presents the recommendations, conclusions and suggestions

for research that are needed in this area of study. It also addresses some

implications of the research recommendation to the construction industry.

10

1.8 Summary and Conclusion

In conclusion, the numerous critisim as to the increasing number of the

construction projects final account of which were settled unreasonably late or far

beyond the period stipulated in the contract. Therefore, this study is to identify the

problem accsociated with the settlement of final account in the government project

and to recommend the solution to the problem related to issuance of final account.

The research has been conducted by analysing the questionnaire and interview which

is distributed to quantity surveyor serve in government agency. From the analysis,

the problem in settlement of final account has been identify and categorized under

several problem discovered during the survey. From that, a critical analysis is done

on the result of survey for the problem and recommended solution for the issues in

contention as the findings of the study.

223

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